Microsoft, Nokia Devices and Services business aim to remake mobile market

The completion of the Nokia Devices and Services business acquisition April 25 will enable Microsoft to accelerate its share of smartphones and feature phones in developed and emerging markets, and increase its role as a devices and services company.

“The opportunity for Microsoft to be both a devices and services company, so that it can deliver the complete proposition to its consumers, is at the heart of this,” Stephen Elop, former Nokia CEO and now executive vice president of the Devices Group at Microsoft, said recently.

The work between the two companies has resulted in many successful devices, including the Lumia line of smartphones, a family of beautiful and easy-to-use devices that has won praise across the industry and from reviewers.

With the deal closed, Microsoft acquires Nokia’s smartphone and mobile phone businesses, its design team, most of its manufacturing and assembly facilities and operations, and sales and marketing support. Microsoft will leverage Nokia’s extensive experience in delivering award-winning Windows Phone devices that are well designed, secure and easy for consumers and businesses alike to use.

The acquisition also brings key capabilities around supply chain, distribution, operational processes and systems and skill in managing hardware margins to Microsoft. The unified company will benefit from speedier execution and best-in-class business operations.

“Nokia certainly has a tremendous depth of experience in the design, the manufacturing and delivery of devices,” Elop said. “Nokia over the years has literally delivered billions of devices. Just in the last year alone, some hundreds of millions.”

A shared vision

When Microsoft and Nokia started working together as partners in February 2011, the companies combined the best of their considerable engineering, design and software strengths. They looked to create something very different than what already existed from the competition and what either company had done before.

The shared vision: Simplicity and elegance in design and use.

Stuart Ashmun, the device design general manager for the Device Group at Microsoft, said “We think about size and weight and ergonomics and the craftsmanship” of a phone, as does Nokia. “How does it feel in your hand? How robust is it? There are thousands of considerations that go into these products that are not apparent or visually identifiable to the end customer. This is another area where we’re finding that there’s a lot of commonality in the approach.”

Microsoft’s partnership with Nokia has brought many successful smartphones to life at a range of prices and with industry-leading features, including Windows Phone devices like the Lumia 520 (named in February as the “Best Low Cost Smartphone” at Mobile World Congress in Barcelona), the Lumia 920, the Lumia 1020 with its groundbreaking 41-megapixel camera and the Lumia 1520 with its 6-inch screen and 1080p full HD display. The Lumia lineup was also among the first smartphones to be offered in a range of colors.

The road ahead

The partnership that brought Microsoft and Nokia together in the first place will be even stronger with the acquisition.

“The real value from this integration is bringing two globally sized capabilities in organizations together under one roof, really intimately and much more efficiently,” said Tom Gibbons, Microsoft corporate vice president who is responsible for the Nokia integration.

“We have been planning for that, we have been learning about how each other does it, we have been going through and assessing who has the best tools for which part of the business and then how do we put those together so we take the best of both worlds, and now we get to start acting on it,” Gibbons said.

“We feel very excited that on Day One, the team will have an already established joint operating plan,” he said. “Customers should see a bunch of great end-to-end experiences that really empower them to have very enjoyable, very comprehensive solutions to things that they want to get done, whether you’re talking about smartphones or feature phones. The feature phone product family coming to Microsoft will start to have more of the Microsoft services shipped on those phones right out of the gate.”

In a February report about worldwide smartphone growth, research firm IDC said that Windows Phone “stands to grow the fastest among the leading smartphone operating systems.”

Elop identifies opportunities for Windows Phone to grow in emerging markets around the world, areas where Microsoft’s footprint is smaller than it is in developed nations.

“The vast majority of people do not have, nor will they ever have a personal computer,” Elop said. “They haven’t been exposed to Windows or Office, or anything like that, and in their lives it’s unlikely that they will. And yet through the mobile phone business we have an opportunity to introduce what we like to call the next billion people, the next billion people to connect to the Internet, to Microsoft, because they’ll have an opportunity perhaps to have a first Skype experience, or a first experience with Bing, as an example. And so there are literally billions of people who can be exposed to Microsoft for the very first time.”

As Nokia becomes part of Microsoft, “We have to not only evolve to fit into Microsoft in general, but into an evolving Microsoft,” he said.

Employees of Nokia’s Devices and Services business are “very excited to be joining Microsoft,” Elop said. “And we look forward to bringing our skills and experiences to Microsoft to do our very best to light up the Microsoft experiences for people all over the world.”

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